Oregon Congressman Earl Blumenauer is pushing an amendment to the America COMPETES Act that would ban duty-free, undocumented “de minimis” shipments valued at $800 or less from China. The amendment is supported by a wide range of manufacturers and organized labor.
The concern centers on what’s in those low-value shipments, which sharply increased in 2020 by as much as 200 percent. US Customs and Border Protection (CPB) told Congress, “Adversaries seek to exploit this volume, presenting CBP with economic risks in the form of intellectual property rights (IPR) infringement as well as safety risks from poor quality and untested consumer products.”
The de minimis exclusion from US duties and documentation, sometimes called the green lane of Section 321 of the Tariff Act of 1930, increased as a legal way to dodge tariffs imposed on China imposed by former President Donald Trump. The rule was created to allow American tourists to bring home travel souvenirs without paying customs duties. It is being exploited now by express shipments that can enter the United States duty-free.
The amendment by Blumenauer, who chairs the House Ways and Means Trade Subcommittee, doesn’t mention China by name. It spells out two conditions for the exclusion that only apply to China as both a nonmarket economy exporter and on a watchlist for inadequate intellectual property protection. Blumenauer’s provision won’t be challenged on the House floor after fellow Oregon Congressman Kurt Schrader withdrew his amendment to strike it.
America COMPETES Act
The America COMPETES Act is designed to invest billions of dollars in US manufacturing and scientific research and to counter Chinese economic influence. The Senate passed a bipartisan version of the legislation last June, which House Ways and Means Chair Richard Neal says isn’t strong enough in combatting China’s market-distorting trade policies. Blumenauer’s amendment is one of tougher provisions Neal has in mind.
Blumenauer’s provision will crack down on China’s aggressive exploitation of so-called ‘de minimis’ procedures in our customs law.
This is the House bill that contains $52 billion to boost US semiconductor production and prevent shortages that have led carmakers and other manufacturers to limit production or close plants. The bill allocates $160 billion to the Office of Science, which operates labs and supports more than 25,000 researchers in national laboratories, universities and industry, and the National Science Foundation, which engages in research in nonmedical fields. A portion of the $160 billion is intended to bolster science, technology, engineering and math education in schools and colleges.
Other provisions in the House Bill would reauthorize Trade Adjustment Assistance for US workers who lose jobs or experience wage reductions because of increased imports and the Miscellaneous Tariff program, which temporarily suspends tariffs on imports used in US manufacturing. The bill also reauthorizes the Generalized System of Preferences (GSP) that lowers tariffs on imports from poor nations, but adds new eligibility criteria tied to environmental, labor and human rights standards.
Among the provisions aimed at countering China is one to strengthen US anti-dumping and countervailing duty rules by expanding their application to exports from countries that have been subsidized by China’s massive Belt and Road infrastructure initiative.
The US Trade Representative would be empowered to review and block US companies from shifting manufacturing overseas if the products were deemed essential to US security interests. The bill authorizes $45 billion over six years in grants and loans to improve US supply chains for public health supplies, food and technology goods, which have been exposed during the coronavirus pandemic. A separate $3 billion fund would be created to strengthen the US supply chain for solar panels.
The US Department of Commerce would be tasked with building up stockpiles of critical materials. A $10.5 billion pilot program would be developed to enable states to stock up on certain drugs, medical equipment and personal protective equipment.
Blumenauer believes many Chinese exports benefitted from intellectual property theft, forced labor or counterfeit goods. The $800 de minimis exclusion was intended to avoid bogging down border agents. China’s equivalent de minimis exclusion for imports tops out at $10.
“De minimis treatment was never meant to be a major avenue of international commerce. It is an administrative provision to ensure customs officers do not waste government resources performing tariff assessments on items of trivial value,” manufacturing groups and unions said in a letter to congressional leaders. “[Blumenauer’s] provision will crack down on China’s aggressive exploitation of so-called ‘de minimis’ procedures in our customs law.”
Reports indicate House Republicans aren’t sold on Blumenauer’s amendment. It’s unclear whether the overall trade and investment legislation will receive bipartisan support when it reaches the House floor. After House passage, a conference committee will be named to iron out differences.